EU has no 'Plan B' if French voters deliver upset

BRUSSELS (Reuters) - The European Union has no special plan if the two anti-EU candidates reach the final round of France's election on Sunday, diplomats said, leaving the bloc to brace itself and hope for a centrist victor.

Even without a shock outcome, Brussels worries that neither of the more mainstream candidates can revive France's economy or help Germany confront doubts about the EU's future if they are victorious in a May run-off.

Diplomats said France needs a leader who will modernise heavily-regulated sectors of the economy and tackle the rigid French labour market, helping to reverse its decline as an economic power relative to Germany over the past two decades.

There is concern that neither youthful independent centrist Emmanuel Macron, who lacks experience, nor centre-right former prime minister Francois Fillon, whose campaign was dogged by scandal, would have the vision or authority to bring change.

"If Marine Le Pen wins the election, the European Union as we know it ceases to exist," said one senior EU diplomat who formerly served in Paris of the far-right leader who threatens to leave the EU without a quick renegotiation.

"Then we have to think about other models ... There is no Plan B," the diplomat said. "The city is shivering inside," the diplomat said of Brussels.

Klaus Regling, the managing director of the euro zone's bailout fund, told a forum in Washington this week he doubted Le Pen would gain support to change France's constitution to take the country out of the EU or the euro zone.

"But it would mean a standstill, growth would remain low," he said of a Le Pen victory.

Despite improving economic data, France's national debt is rising and the economy is barely growing. It remains uncompetitive and suffers from falling productivity, the European Commission has said, adding that recent reforms are not enough.

EU leaders will be able to take stock of any first-round surprise at a summit on April 29 arranged to discuss preparations for Britain's exit negotiations. But diplomats insisted there was no plan if Le Pen and far-left candidate Jean-Luc Melenchon go into the May 7 run-off.

MACRON FAVOURED IN BRUSSELS, BERLIN

In a vote too close to call, some EU diplomats see pro-European Macron, 39, as the best bet to defeat Le Pen in the second round and heal Franco-German rifts inside the EU.

As a former economy minister under outgoing President Francois Hollande, Macron won fans among France's EU partners through his enthusiasm for pro-business reforms.

"Macron's unabashed pro-integration positions, his orthodox economic ideas and his insistence on the key relation with Berlin make him - on paper - a likely Berlin favourite," said Manuel Lafont Rapnouil, a Paris-based political analyst at the European Council on Foreign Relations think-tank.

With Brexit pending, Germany needs a strong France to reinvigorate the EU and make the euro zone stronger and more sustainable. German Chancellor Angela Merkel has received both Macron and Fillon in Berlin.

"The fact that Le Pen and Melenchon didn't go to Berlin speaks volume about the difficulties which would arise if either was elected," Lafont Rapnouil said.

Macron's advisors say he wants a "new deal" with Berlin that could overcome years of tensions over reform of the euro zone, now the economic core of the 60-year-old European project.

Germany is unwilling to directly help poorer euro zone states to underpin the currency area while Macron has warned that without solidarity among its 19 members, the euro may not exist in 10 years' time.

President Macron would also need to show he can deliver on his economic plans. His "En Marche!" ("Forward!") movement has no seats in parliament and his pledge to cut spending by 60 billion euros ($64.48 billion) is likely to provoke protests like those against Hollande's money-saving measures in 2015.

Barclays Research predicts elections in June will result in a hung parliament, with four political forces holding a roughly equal share of seats.

Fillon, 63, whose poll standing is slowly recovering after a financial scandal, also speaks the language the pro-business European Commission likes to hear but wants to reduce the role of EU institutions in French life.

His calls for warmer ties with Moscow are a turn-off for most European capitals seeking unity against what they see as a newly aggressive Russia.

"His desire to reverse the EU's sanctions policy vis-à-vis Russia are at odds with those of Merkel," said Yann-Sven Rittelmeyer, an analyst at the Brussels-based think-tank EPC.